When buying an off-plan home, there is the option of taking over the developer’s mortgage instead of requesting and setting up a new mortgage loan. This alternative has some advantages, but you have to study very carefully and always keeping in mind the rights of the buyer that is decided this way.
By subrogating the developer loan, the buyer accepts the conditions of the existing mortgage that the developer requested to carry out the project. Only the owner of the debt changes. And by not having to formalize a new loan, the new owner saves the payment of some taxes and expenses that would have to be paid if a new mortgage is constituted.
However, not all are advantages if you choose to subrogate the developer’s mortgage. If on the one hand it means savings, on the other it entails the payment of certain commissions, without forgetting that the loan conditions are immovable.
One of the advantages that until now invited subrogation was the greater ease for the bank to approve the operation, compared to applying for a new mortgage. However, given the current economic crisis, specialists warn of a possible tightening in the conditions for granting mortgages, which is already being applied to other types of loans. In any case, the bank has to study and approve the subrogation.
Faced with the subrogation offer by the promoter, it is essential to carefully analyze the conditions of the existing mortgage and compare with the offers of other banks, since what can mean short-term savings can result in a higher cost in interest or commissions, as well as the acceptance of abusive clauses or burdensome conditions.
Buyer’s rights in subrogation
Can the developer impose penalties on the buyer who does not subrogate his mortgage or force him to subrogate? Can you force the payment of the cancellation fee of your mortgage in case the bank does not approve the subrogation? There are certain frequent doubts regarding what in this context may or may not be required of the new owner. But it must be remembered that the buyer has certain rights:
-The promoter must inform the buyer of all the credit conditions in an explanatory note containing all the details of the mortgage. As stated by the Bank of Spain, “it is prohibited that the offer, promotion and advertising directed by the promoter for the sale induce or could mislead its recipients, so it will not be able to silence fundamental data”.
-The developer cannot prevent the home buyer from subrogating his mortgage, if he finds an offer that interests him more. And, in this case, the mortgage cancellation costs correspond to the developer, who is the one who has to pay the commission.
-The promoter cannot apply any penalty in the sale of the home to the buyer who does not accept to subrogate his credit, or change any of the conditions of the sale already agreed.
-The promoter cannot charge the buyer with the expenses of the procedures and the taxes that he must pay.
-As in the signing of any new loan, the bank is obliged to provide the buyer with the deed for review at least 10 days before signing, at which time it will be important to check that the bank has not modified any of the conditions of the loan signed with the developer.
What expenses does the subrogation of the mortgage entail?
Subrogating the developer’s mortgage has among its advantages the savings in certain taxes and procedures: the buyer does not have to pay the Tax on Patrimonial Transmissions and Documented Legal Acts (ITP and AJD) of the mortgage deed and the notary fees are sensibly inferior, here we provide you a guide with more information.
However, there are other expenses and taxes that must be paid in the case of subrogation: the cost of the notary’s office, the subrogation commission, the appraisal of the home, the ITP and AJD of the sale and registration in the Registry of the property.
In short, subrogation is an interesting option if once the conditions of the existing mortgage have been studied and compared with those of other existing loans on the market, they turn out to be beneficial. And in no case can the developer’s conditions be accepted that imply a burden for the buyer that he would not have to assume in the case of signing a new mortgage.